The Great Demographic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival

by Charles Goodhart

There are, of course, several mitigants to our view that the reversal of demographic factors will shift global trends from deflation to inflation over the next thirty years. We have already mentioned two of these, which are included in Chapter 10, notably the possibility of a considerable further rise in retirement ages, and the possibility that the relative generosity of state pensions will decline in future, in order to limit an otherwise rise in tax burden. But in that same chapter we discuss another possible mitigant, which is that, rather than reversing, globalisation could take another turn. While birth rates have been going down sharply in most of the advanced countries, this has not been so in much of the Indian subcontinent, and particularly not so in Africa. There will be a massive rise in the available working population in these parts of the world. Just as the production of goods was shifted from the West into China over the last three decades, could a similar shift lead to the production of goods moving to the Indian subcontinent and, particularly, to Africa, where the rate of growth of the working population in countries like Nigeria and the Congo will be quite remarkable over the next few decades? There is also, of course, the possibility of further waves of migration from these poor countries into the richer countries in America, Europe and Asia.